Just Thinking

On paper, it's hard to envision two more radically different job descriptions than those of bank vice president andInternet futurist. Yet even two such disparate occupations can find common ground in certain subjects, such as how
banks can avoid disintermediation in the evolving e-commerce world.

At a session on commercial payments held at the September Sibos conference in San Francisco, Ann Cairns, vice
president and global solutions head for e-Business at Citicorp, let the audience know that large aggregators and
technology firms have targeted the bank space on the Internet. These entities now offer first-to-market,
customer-empowered solutions that will eventually drive financial transactions costs-still an important revenue
stream for many institutions-to near zero.

Her solution to this impending dilemma: Banks need to embrace the Web. Financial institutions need to evolve beyond
the settlement end of the e-business chain and partner with providers to develop transaction solutions that place
them directly before the consumer.

In addition, banks will also have to alter their age-old business models and mindsets, Cairns warned. Instead of fearing
the Internet and its ability to drastically reduce financial transaction fees, banks should do all they can to help lessen
the cost of doing business over the Web. Although the transaction fees will be microscopic compared to what they are
today, the bank's monetary loss will be more than offset by the increased number of transactions. Much like today's
telephone companies, bank profits will grow each year as people use the now inexpensive and pervasive technology to
perform a growing number of Internet tasks.

Later that day, John Perry Barlow, the ex-Grateful Dead lyricist turned Internet pioneer who first called the medium
"cyberspace," unknowingly reiterated many of Cairns' thoughts in a session on the future of electronic business.
Essentially, Barlow believes that the idea of property will eventually be eliminated from the Internet, and that in this
environment, all transactions will take place between individual (I2I) as opposed to businesses (B2B). These
transactions will happen instantaneously (T-zero) and involve small amounts of barter (micro-transactions) in the
form of bit-based currency (digital cash) as opposed to money.

Where do banks fit into this economic view? According to Barlow, people will still need secure systems (pipes) run by
trusted intermediaries through which to funnel electronic escrow. If banks become "pipe managers," they can siphon
a small amount of digital cash from each transaction. So, much like Cairns, Barlow sees banks avoiding
disintermediation by adapting to the Web and relying on transaction volume as opposed to high fees.

Futurists and bankers finally on the same page? The chill I'm feeling right now must surely be Hell freezing over.